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Following a sharp drop in third-quarter net profit, internet company Yahoo has announced that it will lay off 1,400 employees - at least ten per cent of its workforce. The group is hit hard by the economic slowdown and faces strong competition.

Yahoo announced plans on Tuesday to lay off at least 10 percent of its workforce, some 1,400 employees, as the weak economy cut deeply into third-quarter profits at the struggling Web company.

Yahoo said net profit for the third-quarter of the year was 54 million dollars, or four cents per share, down from 151 million dollars and 11 cents per share during the same period of 2007.

It said revenues were 1.78 billion dollars in the third-quarter, an increase of only one percent over the 1.76 billion dollars in the same period last year.

Yahoo has been losing ground on the Internet to companies such as Google, MySpace and Facebook and the economic slowdown has hurt the firm particularly hard as advertisers cut back on spending.

"While we are disappointed with our results, we're pleased that we continue to benefit from the aggressive cost management efforts we have pursued during the year," he said in a statement.

"We have the balance sheet strength, liquidity, and free cash flow we need to continue to make progress on our core strategies as we address this slowdown," Jorgensen added.

The Sunnyvale, California-based Internet company said it would carry out its second round of layoffs this year in a bid to cut costs.

"Yahoo expects to reduce its global workforce by at least 10 percent during the fourth quarter of 2008," the company said, reducing its annual expenses by some 400 million dollars.

Yahoo, which had 14,300 employees at the end of June, already announced in January that it would be cutting more than 1,000 jobs this year. The announcement Tuesday is for a second round of cuts.

In a bid to reverse its fortunes, Yahoo has rolled out several new products and entered into an advertising tie-up with Google but the deal has yet to receive a green light from US Justice Department anti-trust regulators.

Google chief executive Eric Schmidt said Tuesday that Google and Yahoo had extended their talks with the Department of Justice regulators examining their proposed search advertising deal.

The Department of Justice had been expected to announce on Wednesday whether they would give the green light to the tie-up between Google and Yahoo, respectively number one and number two in the Internet ad market.

Yahoo is hoping to earn hundreds of millions of dollars from the deal with Google in the first year alone.

Yahoo's share price has shed more than 40 percent over the past three months but it gained more than seven percent to 12.58 dollars in after-hours trading on Monday after the cost-cutting moves were announced.

Yahoo's management earlier this year rejected a 33-dollar-a-share takeover bid for the company from US software giant Microsoft, earning the ire of some shareholders.